CBRE gave robust earnings guidance Thursday after capping a challenging year for commercial real estate with a strong showing in the fourth quarter. Along with its major peers, CBRE stock broke out.
CBRE Earnings And Outlook
On Thursday, the industry giant easily beat earnings and revenue estimates for the fourth quarter of 2023, FactSet shows.
In Q4, CBRE earnings rose 3.8% per share to $1.38, marking the first gain after six consecutive quarters of declines. Its EPS plunged by a third to $3.84 for the full year, despite a 4% revenue gain.
The commercial real estate firm anticipates an earnings comeback in 2024. It guided EPS of $4.25-$4.65, with the midpoint above FactSet consensus and implying midteens percentage growth.
CBRE Stock, Real Estate Stocks
Shares gapped up 8.5% to 94.30 in big volume on the stock market today. CBRE stock seized a 94.27 buy point from a flat base. It hit a 52-week high intraday.
Among other commercial real estate stocks, Cushman & Wakefield jumped 8.4% Thursday. Cushman & Wakefield stock topped an 11.05 entry from a flat base, according to MarketSmith pattern recognition.
Jones Lang LaSalle soared 8.9%. The stock cleared a 191.21 entry.
Cushman & Wakefield and Jones Lang LaSalle are expected to report earnings later this month.
Commercial Real Estate Giant Defies Doom
Commercial real estate brokerage businesses have suffered from the rapid rise in interest rates. Many employees hesitated to return to work in offices after the pandemic as well.
Now a new threat looms. Commercial property values are set to plunge further, while hundreds of billions of dollars in commercial real estate loans are coming due over the next few years, reports say.
A shift in strategy is helping CBRE navigate through this difficult landscape.
The company's business mix has increasingly moved from transactional revenue to more recurring, contractual revenue over the past 10 years, says Morningstar analyst Suryansh Sharma.
The Global Workplace Solutions, or GWS, segment illustrates the pursuit of less cyclical growth.
The GWS unit engages in facilities management and project management for corporations. In Q4, it continued to grow revenue and profits by double digits.
The advisory segment contains CBRE's traditional brokerage lines, including property sales and leasing, loan servicing and mortgage origination. In Q4, it delivered flat profit growth on slightly lower revenue.
Growth in GWS and other "resilient businesses" have helped the company to weather "market-driven revenue declines in businesses that are sensitive to interest rates and debt availability," CBRE CEO Bob Sulentic said in Thursday's earnings release.
In 2023, the resilient businesses made up 60% of total operating profit, up from 32% in 2011. But they generate lower operating margins than the company's advisory business.
